The children’s wear market in China is changing, the prevalence of traditional market is challenged by the emergence of new distribution formats in the segment. The gap between big and local brand’s marketing is visible.
- Definition / Scope
- Market Overview
- Market Risks
- Top Market Opportunities
- Market Drivers
- Market Restraints
- Industry Challenges
- Technology Trends
- Regulatory Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Distribution Chain Analysis
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
A child is a human being who is not yet an adult. According to age-related development periods, children are categorized into following intervals: newborn (ages 0–4 weeks); infant (ages 4 weeks – 1 year); toddler (ages 1–3 years); preschooler (ages 4–6 years); school-aged child (ages 6–11 years);adolescent (ages 12–19) .
Children’s wear is clothes that are designed for boys, girls, and babies such as sweaters, jackets, T-shirts, pants, etc. Cotton, wool, fur, linen, and silk are the most used material of Children’s wear .
China has involved at all levels of the value chain in this market and the fashion industry is not exempt from this rule. The fashion trend in China seems to out space the men and women wear and introduce a highly lucrative business market for children’s wear .
Children’s ready-to-wear market is one of the fastest growing segments as the purchase for the men/women wear is repeated less as compared to children’s wear. The ready-to-wear children market can be divided into three categories: Baby clothes, Girls’ clothing and Boys’ clothes
China, the world’s most populous country, has a total children population of 246 million as of the beginning of 2019 . The children population is expected to reach about 250 million by 2023 . As the population of children is increasing stably, the demand is also increased correspondingly.
With about 25% share of the manufacturing market, China is the largest supplier of Children’s wear. The Children’s wear from China is largely exported to US, Europe, and other countries. At the same time, a huge amount of foreign brands products are imported into China as well .
China’s market remains one of the fastest growing markets in the world, and the growth momentum of children’s wear is set to continue in the coming years. The children’s wear market in China is forecast to grow at a CAGR of about 7% in 2019-2022, higher than the global average of 6.4%. Among the various segments of the apparel sector, children’s wear market is the fastest growing segment.
Adults can delay the purchase of new clothes for themselves however children quickly outgrow clothes and therefore the purchase of new children’s clothing is a necessity.
Since early 2014, the Chinese government has implemented a new policy which allows couples to have two children if either parent is an only child in the family. Two million extra babies are expected each year as a result of the new policy. This provides further development opportunities for children’s wear market .
The following statistic shows retail sales of children’s wear in China from 2011 to 2017. In 2017, the sales revenue, children’s wear had reached 22.65 billion USD in China.
Raw material prices: Children wear companies are facing challenges to tackle the issue of increase in prices of raw materials. As per recent stats, wool prices have risen 45.7 percent with the average EMI (Eastern Market Indicator) going from US$8.05/kg to US$11.73/kg. This has to make brands a difficult choice to make, either to raise prices and lose customers or to keep customers and accept lower profits .
Shrinking profit margins: The profit margins are low due to an increase in competition, lack of brand differentiation and low value-added products. The garment-making sector in China is undergoing a difficult time as its profits continue to shrink. Some factories have closed, while others are struggling to keep up their business.
The High labor costs and labor turnover has resulted the number of clothing companies in Zhuji alone, shrunk to 200-300 from a peak of about 650. The average hourly wage of Chinese manufacturing workers grew to $3.60 in 2016 from $2.20 in 2011 which have cut the profits by more than 30 percent
Top Market Opportunities
Chinese Parents are increasingly looking for stylish and fashionable designs on one hand while brands are offering children’s apparel that is similar to the style of adults clothing on the other hand. Moreover, the growth of the fashion industry includes ample opportunities for children’s as well .
Design and Development: The quality and constant rollout of new and innovative products are key success factors in this market. Less than 10% of Chinese companies in the T&A sector have their own brands. Most companies engage in OEM, ODM, and processing.
More Chinese enterprises are seeking to cooperate with experienced European designers, or to buyout established European brands together with their design and development studios.
Top Choice of Material as Cotton: As children under three years of age have very delicate and sensitive skin, parents are particularly concerned about the materials used in their clothing. Pure cotton was the preferred choice for baby clothing and was virtually the only acceptable option for undergarments.
For many parents, cotton is seen as a natural material containing no chemical substances. It is also more permeable and has a softer feel, making it more suitable for baby clothes than synthetic materials, such as polyester
Two child policy: Full implementation of the two-child policy will continue to drive demand in the childrenswear market in China. China is expected to have an extra 1.5 million new-born babies per annum over the next couple of years. Considering the expected baby boom, baby and toddler wear will be the main powerhouse for the childrenswear sector.
Baby and toddler wear is expected to record the CAGR of 11% in constant value terms among apparel and footwear categories over the forecast period of 2016-2020 .
Trendy designs: Parents are increasingly looking for stylish and trendy designs. Brands are offering children’s clothes that are similar to the style of adults clothing. A typical example is Annil. However, the different specifications and safety regulations for children’s wear often make it difficult for them to extend to the children’s wear market. Some examples include Semir, Li Ning, Xtep, Uniqlo, and Zara.
The proliferation of Brands: The domestic companies began to develop their own brands of children’s clothing (such as Minipink) as the economy took off. Foreign companies have also come to see the great prospects of China’s baby and children market and some big companies and leading brands are beginning to venture into the children’s apparel business.
Top-end international brands like Armani, Burberry and Bonpoint and mass-appeal labels like GAP, Zara and Uniqlo have all ventured into the children’s wear market .
Standards and Certification: For apparel products, GB (national level standards) and industry standards will apply depending on the product. European importers may, therefore, have to self-declare conformity to relevant Chinese standards depending on the product.
Imported apparel may be tested based on its performance for safety, hygienic and environmental factors as outlined in GB 18401 and other relevant GB Standards. Textiles used for safety purposes may also need mandatory conformity testing according to relevant Chinese regulations.
IPR Issue: Counterfeiting or imitation of brand name products is rampant in China while IPR legislation is still in the developing stage and IPR enforcement is weak. For an online business, it is a must to offer as many guarantees as possible to retailer .
Customs: All textile and apparel products will be subject to AQSIQ inspection procedures but not all will be tested. However, if tested and found to be in non-compliance with Chinese standards, the products in question will be destroyed or returned.
Local Competition: European companies will be competing with other foreign exporters such as the USA, Japan, and Korea in the high-end market. In the meantime, local companies already enjoy a ready network of trading partners and are actively trying to upgrade to international standards through more investment in R&D or JV establishment.
European SMEs will be less familiar with the local business environment and customer preferences, and will, therefore, need to quickly adapt and leverage their product innovations and global network.
Fragmented Distribution Channel: Wholesale markets are mostly dominated by low and medium-end products. European SMEs have to deal with local distributors in each region, which is a heavy tap on an SME’s limited resources. It is still not easy to find a sales agent who is able to both execute a high-end product image and have strong connections with different sales channels.
Operational challenges: The lack of availability of skilled workers is often cited as a primary reason for the inability of the players in this industry to scale up their operations such as in areas of sales and marketing, buyers, senior management etc. The short supply of quality retail spaces is another challenge. It is very important to identify where are located the best places
The growth of online commerce opens new doors for players to expand their presence in the market. The online channel represents 4 million of the turnover of the segment where 70% of the market is held by Tmall (50%) and JD.com (20%), two major players in online commerce of the country. When the physical stores and online are complementarily used, the market is popularize.
Also, “Wish” is a symbolic representation of a growing trend in the e-commerce zone alluring the customer to buy directly from Chinese manufacturers and merchants.
The policy of two children introduced in 2016 complementarily to be removed as it an that 24% of the population will get older (>=65years) and this will hinder the working labour supply. This ultimately will flourish the wear market with demand for more children wears.
The liberalization of the domestic market initiated by government enables international brands to enter the China market and develop massively. Direct investment, licensing agreement or sales mediators are practices commonly employed to pick up its visibility and promotion in physical outlets .
Other Key Market Trends
The customer preference also represents the trend into Chinese consumer demand. In China, above 70% of the parents have a preference to shop in malls, 56% of the parents shop in department stores and greater than 50% favor to visit shopping malls and department stores with child-related facilities at least every month and over 30% visit on a weekly basis. The visit by younger children parents are much more than any other group .
Market Size and Forecast
The total market size for Children’s wear in China in 2018 was 21.43 million USD, growing at 7% increase per year. In global comparison, most revenue is generated in China. The market registered strong value growth in 2017, overshadowing the overall apparel and footwear market.
Children’s wear market is the fastest growing sector and is more resilient than women’s wear and menswear market. The domestic markets are growing at a rate higher than the global average and are expected to keep growing at a 7% CAGR and are expected to reach 28.08 million USD by 2022 .
China remains the top supplier of woven apparel to the EU-28. On the export front, demand for EU clothing weakened strongly in Russia and Ukraine during 2015. Among clothing, knitted articles represented 17% of total EU clothing exports. EFTA and NAFTA areas make up the two main buyers, for knitted items, with 21% and 15.5%.
For the zone of emerging countries in Asia, demand was steady with a total share of purchasing of made up garments of 24.8%. Given China’s vast production capacity, very likely it will remain the top apparel sourcing destination for most EU and US fashion apparel companies .
The following statistic shows the projected size of children’s wear in China from 2018 to 2022. In 2018, the sales revenue for children’s wear had reached 21.43 billion USD in China.
The e-commerce business of the Children’s wear market is increasing rapidly in China. Based on the basis of the distribution channel, the market is segmented into online and offline.
The sale of Children’s wear products through the online channel is increasing due to increasing penetration of online sale in China. In the market, 50% of total revenue is expected to be generated through online sales by 2021 .
Based on the basis of wear categories, the market is segmented into baby and toddler’s wear market, girl’s wear market and boy’s market. Baby and toddler wear is and will continue to be the best-performing category in the children’s wear segment.
The growth of girls’ wear market exceeds that of boys’ wear market. Higher purchasing frequency and higher unit prices are the main driving forces behind the higher growth of girls’ apparel. Baby and toddler wear is forecast to grow at a CAGR of 10.1% in 2014-2019e, compared with 3.5% for boy’s wear and 5.0% for girl’s wear.
For many children, clothing-allergy is common which is mainly caused due to the materials and substances embedded within the textile. Many players are coming up with organic baby clothes lines which is likely to change the childrenswear market dynamics during the 2019-2022 period .
Many players are adopting new technologies to provide customers with a more personalized shopping experience. The social media portals as We chat has become an important source to explore the brands that enter the market and has been a good way to improve customer service as it enables the direct link with customers.
Moreover, the population movement will cause a drastic decline in the costs usually associated with distance, due to the technological advances. The 3-D printing will enable low-cost, small-scale production anywhere, cutting transport costs and allowing for instant delivery
Distribution Chain Analysis
When it comes to distribution, the distributors play a significant role in the market since they will distribute to buy and import the products. However, as we saw earlier, the market has diversified and is changing.
It has contributed to the emergence of new distribution formats in the segment. Specialized stores, E-commerce represents new growth-enhancing formats in the textile and ready-to-wear children’s markets.
Multi-brand stores, have also gaining popularity over recent years and are mainly located in key cities in China. Multi-brand stores are targeting the rising middle-class and more affluent consumers
The market for children’s wear in China is evolving and expanding. Several new companies along with the old ones are competing with each other. Semir Group Co Ltd, with its Balabala brand, maintained its leadership in 2017. It targets children aged 0-14 years, and profits from a large consumer base, omnichannel distribution as well as high brand awareness and penetration.
Sportswear brands are becoming active in venturing into childrenswear by extending their product lines; for example, the Li Ning Young range. Sports brands have also merged with or acquired children’s wear brands to profit from the growth opportunities. Anta’s acquisition of Hong Kong-based Kingkow in 2017 is the best example .
Similarly, baby and toddler wear recorded the strongest value growth, which was chiefly attributable to the introduction of the two-child policy. On the Chinese market, there are three major brands that dominate this positioning i.e. LaLandee, Mickey and Les Enphants.
These brands market their product offerings in specialized and premium stores whereas local brands are positioned on a much lower pricing policy than foreign brands. They, therefore, have the advantage of being marketed on a multitude of channels. The leading brands of the market are Yaduo, Shuihaier, M-linen, and Yeeshow .
Companies mainly compete in terms of the quality and design of childrens wear, and customers are looking for premium and luxury brands, as well as the trendiness of cheaper fast fashion childrens wear brands .
Key Market Players
- Shanghai Mtree International Trade Company Ltd: Shanghai Mtree has been a manufacturer and exporter of baby products for 10 years now. Mtree’s products almost cover all kind of casual apparels, among which Infant and Kids’ garments are their first products. Relying on normal products, such as sleepers, hooded towels, socks, and toys, they also supply gift set series including garment, toys, and brushes .
- Burberry Children: Burberry was one of the first brands to launch a luxury children’s line. Big brands like Lanvin, Armarni, Gucci and Fendi Kids followed suit, arriving in 2011, and Dolce & Gabbana in 2012. .
- Balabala: Balabala is a Chinese fashion brand established in 2002, owned by domestic apparel company Semir Group. The brand has more than three thousands store count nationwide which includes both self-managed and franchised spreading over 180 cities across China .
- Ganzhou Yihong Garment Co., Ltd.: Ganzhou Yihong Garment Co., Ltd. specializes in manufacturing and exporting all kinds of knitted pet clothing. It also produces clothes babies, children, and adults. They export to North and South America, Europe, Australia and so on, more than 30 countries .
- Guangzhou Wilboss Textile Co., Ltd.: Guangzhou Wilboss Textile Co., Ltd. offers a variety of products which can meet your multifarious demands of the people. They export to other countries as well such as the countries in North America, Europe, Southeast Asia/ Mideast, Australia. The company have an annual output value of US$5 Million – US$10 Million .
- Guangzhou Fakifii Garment Co., Ltd.: Guangzhou Fakifii garment Co., Ltd has 16 years of experience and is one of the best professional Garment manufacturers in Guangzhou of China. They engage in garment export with an annual output of around 3600,000 pieces. Most of their products are Men’s & Women’s and Kid’s apparel. They regard themselves to be specialized in providing the good service as a merchandiser and also procurement agent as importers, chain stores in USA & Europe .
The market of children’s wear has diversified and is changing contributing to the emergence of new distribution formats in the segment. Specialised stores, E-commerce represents new growth-enhancing formats in the textile and ready-to-wear children’s markets.
The dominating brands market their product offerings in specialised and premium stores while local brands are positioned on a much lower pricing policy.
All of them have their target customers and are operating because of certain alignments with their target customer. Identification of appropriate customers and the development of specific marketing strategies and implementation of the same could be beneficial to the market.
- CAGR: Compound Annual Growth Rate
- USD: United States Dollar